9911796707
TMI Blog2023 (2) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... he affairs of the company for purposes of pinning liability in terms of section 179 rather than discovering the element of gross neglect , misfeasance or breach of duty on the part of the petitioner in relation to the affairs of the company and establishing its corelation with non-recovery of tax dues. The petitioner having discharged the initial burden, the AO had to show as to how the petitioner could be attributed such a gross neglect, misfeasance or breach of duty on her part. As in the present case, the AO has not specifically held the petitioner to be guilty of gross neglect, misfeasance or breach of duty on part in relation to the affairs of the company. Not a single incident, decision or action has been highlighted by the AO, which would be treated as an act of gross neglect, breach of duty or malfeasance which would have the remotest potential of resulting in non-recovery of tax due in future. - DHIRAJ SINGH THAKUR ABHAY AHUJA, JJ. For the Petitioner : Mr. J.D. Mistri, Senior Advocate with Mr. Madhur Agrawal, Mr. Fenil Bhatt, Mr. Jas Sanghavi and Mr. Viraj Y. Bhate i/b PDS Legal, Advocates. For the Respondents : Mr. Suresh Kumar, Advocate. JUD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. It would be worthwhile to briefly advert to them for purposes of clarity. This would also give the background in which the assessee company was formed and the agreements that were executed between various entities in that regard. Brief Background : 4. The petitioner s husband, Shri Prakash Kamat is stated to have developed a smart card based ticketing solution for being used at various public transport organizations like BEST, Central and Western Suburban trains etc. Trials were run successfully and an agreement was entered into between Shri Prakash Kamat and BEST and Central Railways in 2006. The projects with BEST and Railways were to be implemented on BOT model and required funds to the tune of Rs.50 to 60 Crores as initial investment. Khaleej Finance and Investment, a company registered in Baharain (hereinafter referred to as KFI ) agreed to make an investment in the said project subject to certain conditions, according to which a Special Purpose Vehicle was to be incorporated to carry on the said project which lead to incorporation of KAPL on 30th March 2006. Investment was made by KFI in the said project through its Mauritius based company AFC System Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the company. 7. The Assessing Officer ( AO ), by virtue of the order impugned dated 22nd December 2017 passed under section 179 of the Act rejected the contention of the petitioner. It was held that not only had the petitioner failed to establish that she was not actively involved in the management of the company during the financial year 2007-08 and 2008-09 and further that she had failed to establish that there was no gross neglect, malfeasance or breach of duty on her part. The AO held that there was not a shred of doubt that Mrs. Kamat was actively involved in the day-to-day affairs of the company till she was removed in September 2009. As regards the disputes between the petitioner and KFI, the AO held that it was normal to have such disputes during the working of an enterprise. 8. The petitioner preferred a revision petition under section 264 of the Act against the order dated 22nd December 2017 passed under section 179 of the Act, which too, came to be dismissed vide order dated 18th March 2019 simply on the ground that the petitioner was a director for the relevant assessment years and hence was liable. 9. Mr.Mistri, learned senior counsel for the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e attributed to any gross neglect, misfeasance or breach of duty on his part in relation to the affairs of the company. It therefore follows that if tax dues from a private company cannot be recovered then the same can be recovered from every person who was a director of a private company at any time during the relevant previous year. However, such a director can absolve himself if he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty in relation to the affairs of the company. 14. In so far as the requirement of the first part of the section is concerned, it can be seen from the order passed under section 179 of the Act that steps were taken for recovery against the company M/s. Kaizen Automation Pvt. Ltd. (KAPL) including attachment of its bank accounts which did not yield any results. The company is also stated to be not traceable on the addresses available with the AO, and therefore, according to the AO, the only course left was to proceed against the directors in terms of section 179 of the Act. 15. The stand of the petitioner is that she could not be proceeded against, inasmuch as there was no gross neglect, malfeasance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such grounds and come to a conclusion in this respect. Significantly, the question of lack of gross negligence, misfeasance or breach of duty on part of the director is to be viewed in the context of non recovery of the tax dues of the company. In other words, as long as the director establishes that the non recovery of the tax cannot be attributed to his gross neglect, etc., his liability under section 179(1) of the Act would not arise. Here again the legislature advisedly used the word gross neglect and not a mere neglect on his part. The entire focus and discussion of the Assistant Commissioner in the impugned order is with respect to the petitioner's neglect in functioning of the company when the company was functional. Nothing came to be stated by him regarding the gross negligence on part of the petitioner due to which the tax dues from the company could not be recovered. In absence of any such consideration, the Assistant Commissioner could not have ordered recovery of dues of the company from the director. We would clarify that in the present case the petitioner had put-forth a strong representation to the proposal of recovery of tax from him under section 179 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
